Tech and Energy Lead Market Rally as Fed Pivot Hopes Grow

U.S. equity markets extended their recent rally on Friday, with the tech-heavy Nasdaq surging 1.1% to 11,240.23 and the S&P 500 rising 0.4% to 3,972.82. The gains were fueled by investor optimism that the Federal Reserve may moderate its aggressive tightening cycle following softer-than-expected inflation figures. Market sentiment shifted as the CME FedWatch Tool indicated an 80.6% probability of a 50-basis-point rate hike next month, a deceleration from previous 75-basis-point increments. This macro tailwind was complemented by news from China, where the government began loosening COVID-19 restrictions and reducing quarantine requirements for inbound travelers. The energy sector saw substantial gains as December crude oil futures jumped $3.51 to $89.98 per barrel, lifting the Philadelphia Oil Service Index by 4.2%. Similarly, the NYSE Arca Steel Index spiked 5.2% on the back of China's reopening. Conversely, the Dow Jones Industrial Average fell 0.4% to 33,579.71, weighed down by losses in healthcare giants including UnitedHealth, Johnson & Johnson, and Merck. Despite the rally, U.S. consumer sentiment provided a bearish counterpoint. The University of Michigan reported a November sentiment index of 54.7, significantly lower than the expected 59.5. Inflation expectations also ticked upward, with one-year projections rising to 5.1% and five-year expectations reaching 3.0%. The positive momentum extended to Asia, where the Hang Seng Index surged 7.7% and the Nikkei 225 jumped 3.0%. European markets remained mixed, with the DAX and CAC 40 posting modest gains while the FTSE 100 declined slightly.